Question 1

Which of the following ideas is the most plausible?

Accepted Answer

A)  Reducing a high tax rate is less likely to increase tax revenue than is reducing a low tax rate.
B)  Reducing a high tax rate is more likely to increase tax revenue than is reducing a low tax rate.
C)  Reducing a high tax rate will have the same effect on tax revenue as reducing a low tax rate.
D)  Reducing a tax rate can never increase tax revenue.E) A) and C)
F) A) and D)

Question 2

An increase in the size of a tax is most likely to increase tax revenue in a market with

Accepted Answer

A)  elastic demand and elastic supply.
B)  elastic demand and inelastic supply.
C)  inelastic demand and elastic supply.
D)  inelastic demand and inelastic supply.E) A) and C)
F) A) and B) D

Question 3

Figure 8-22 
-Refer to Figure 8-22.Suppose the government initially imposes a $3 per-unit tax on this good.Now suppose the government is deciding whether to lower the tax to $1.50 or raise it to $4.50.Which of the following statements is not correct?

Accepted Answer

A)  Compared to the original tax,the larger tax will decrease tax revenue.
B)  Compared to the original tax,the smaller tax will decrease deadweight loss.
C)  Compared to the original tax,the smaller tax will decrease tax revenue.
D)  Compared to the original tax,the larger tax will increase deadweight loss.E) A) and D)
F) A) and C)

Question 4

If the tax on a good is increased from $1 per unit to $4 per unit,the deadweight loss from the tax increases by a factor of

Accepted Answer

A)  5.
B)  9.
C)  16.
D)  24.E) B) and D)
F) All of the above

Question 5

Suppose the government increases the size of a tax by 20 percent.The deadweight loss from that tax

Accepted Answer

A)  increases by 20 percent.
B)  increases by more than 20 percent.
C)  increases but by less than 20 percent.
D)  decreases by 20 percent.E) B) and C)
F) A) and C) B

Question 6

Ronald Reagan believed that reducing income tax rates would

Accepted Answer

A)  do little,if anything,to encourage hard work.
B)  result in large increases in deadweight losses.
C)  raise economic well-being and perhaps even tax revenue.
D)  lower economic well-being,even though tax revenue could possibly increase.E) A) and D)
F) B) and D)

Question 7

In the early 1980s,which of the following countries had a marginal tax rate of about 80 percent?

Accepted Answer

A)  United States
B)  Canada
C)  Japan
D)  SwedenE) A) and C)
F) A) and D)

Question 8

Which of the following events always would increase the size of the deadweight loss that arises from the tax on gasoline?

Accepted Answer

A)  The demand for gasoline becomes more inelastic.
B)  The slope of the supply curve for gasoline becomes steeper.
C)  The amount of the tax per gallon of gasoline increases.
D)  All of the above are correct.E) A) and D)
F) A) and B)

Question 9

Which of the following statements is correct?

Accepted Answer

A)  A decrease in the size of a tax always decreases the tax revenue raised by that tax.
B)  A decrease in the size of a tax always decreases the deadweight loss of that tax.
C)  Tax revenue decreases when there is a small decrease in the tax rate and the economy is on the downward-sloping part of the Laffer curve.
D)  An increase in the size of a tax leads to an increase in the deadweight loss of the tax only if the economy is on the upward-sloping part of the Laffer curve.E) All of the above
F) A) and C)

Question 10

Assume that for good X the supply curve for a good is a typical,upward-sloping straight line,and the demand curve is a typical downward-sloping straight line.If the good is taxed,and the tax is tripled,the

Accepted Answer

A)  base of the triangle that represents the deadweight loss triples.
B)  height of the triangle that represents the deadweight loss triples.
C)  deadweight loss of the tax increases by a factor of nine.
D)  All of the above are correct.E) C) and D)
F) B) and C)

Question 11

Figure 8-22 
-Refer to Figure 8-22.Suppose the government changed the per-unit tax on this good from $3.00 to $1.50.Compared to the original tax rate,this lower tax rate would

Accepted Answer

A)  increase tax revenue and increase the deadweight loss from the tax.
B)  increase tax revenue and decrease the deadweight loss from the tax.
C)  decrease tax revenue and increase the deadweight loss from the tax.
D)  decrease tax revenue and decrease the deadweight loss from the tax.E) All of the above
F) A) and B) D

Question 12

Figure 8-22 
-Refer to Figure 8-22.Suppose the government initially imposes a $3 per-unit tax on this good.Now suppose the government is deciding whether to lower the tax to $1.50 or raise it to $4.50.Which of the following statements is not correct?

Accepted Answer

A)  Compared to the original tax,the larger tax will decrease tax revenue.
B)  Compared to the original tax,the smaller tax will decrease deadweight loss.
C)  Compared to the original tax,the smaller tax will decrease tax revenue.
D)  Compared to the original tax,the larger tax will increase deadweight loss.E) A) and B)
F) B) and C)

Question 13

Suppose the federal government doubles the gasoline tax.The deadweight loss associated with the tax

Accepted Answer

A)  also doubles.
B)  triples.
C)  quadruples.
D)  rises by a factor of 8.E) C) and D)
F) None of the above

Question 14

Figure 8-24.The figure represents the relationship between the size of a tax and the tax revenue raised by that tax. 
-Refer to Figure 8-24.Tax revenue would

Accepted Answer

A)  decrease if the economy began at point B and then the tax rate was decreased.
B)  increase if the economy began at point F and then the tax rate was decreased.
C)  decrease if the economy began at point C and then the tax rate was increased.
D)  All of the above are correct.E) B) and C)
F) A) and B)

Question 15

Figure 8-23.The figure represents the relationship between the size of a tax and the tax revenue raised by that tax. 
-Refer to Figure 8-23.The curve that is shown on the figure is called the

Accepted Answer

A)  deadweight-loss curve.
B)  tax-incidence curve.
C)  Laffer curve.
D)  Lorenz curve.E) A) and B)
F) A) and C)

Question 16

The Laffer curve illustrates that

Accepted Answer

A)  deadweight loss rises by the square of the increase in a tax.
B)  deadweight loss rises exponentially as a tax increases.
C)  tax revenue first rises,then falls as a tax increases.
D)  Both a) and b) are correct.E) All of the above
F) A) and B)

Question 17

Assume that for good X the supply curve for a good is a typical,upward-sloping straight line,and the demand curve is a typical downward-sloping straight line.If the good is taxed,and the tax is doubled,the

Accepted Answer

A)  base of the triangle that represents the deadweight loss quadruples.
B)  height of the triangle that represents the deadweight loss doubles.
C)  deadweight loss of the tax doubles.
D)  All of the above are correct.E) None of the above
F) B) and C)

Question 18

Figure 8-19
The vertical distance between points A and B represents the original tax. 
-Refer to Figure 8-19.If the government changed the per-unit tax from $5.00 to $2.50,then the price paid by buyers would be $7.50,the price received by sellers would be $5,and the quantity sold in the market would be 1.5 units.Compared to the original tax rate,this lower tax rate would

Accepted Answer

A)  increase government revenue and increase the deadweight loss from the tax.
B)  increase government revenue and decrease the deadweight loss from the tax.
C)  decrease government revenue and increase the deadweight loss from the tax.
D)  decrease government revenue and decrease the deadweight loss from the tax.E) A) and D)
F) A) and C)

Question 19

Suppose the tax on automobile tires is increased so that the tax goes from being a "medium" tax to being a "large" tax.As a result,it is likely that

Accepted Answer

A)  tax revenue increases,and the deadweight loss increases.
B)  tax revenue increases,and the deadweight loss decreases.
C)  tax revenue decreases,and the deadweight loss increases.
D)  tax revenue decreases,and the deadweight loss decreases.E) B) and C)
F) None of the above

Question 20

Figure 8-21 
-Refer to Figure 8-21.Suppose the market is represented by Demand 1 and Supply 1.At first the government places a $3 per-unit tax on this good.Then the government decides to raise the tax to $6 per unit.Compared to the original tax rate,the higher tax will

Accepted Answer

A)  increase tax revenue and increase the deadweight loss from the tax.
B)  not change tax revenue and increase the deadweight loss from the tax.
C)  decrease tax revenue and increase the deadweight loss from the tax.
D)  decrease tax revenue and decrease the deadweight loss from the tax.E) A) and C)
F) C) and D)

Exam 8: Application the Cost of Taxation: Deadweight Loss and Tax Revenue As Taxes Vary

Which of the following ideas is the most plausible?

Correct Answer
verified

An increase in the size of a tax is most likely to increase tax revenue in a market with

Correct Answer
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D

Figure 8-22 -Refer to Figure 8-22.Suppose the government initially imposes a $3 per-unit tax on this good.Now suppose the government is deciding whether to lower the tax to $1.50 or raise it to $4.50.Which of the following statements is not correct?

Correct Answer
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If the tax on a good is increased from $1 per unit to $4 per unit,the deadweight loss from the tax increases by a factor of

Correct Answer
verified

Suppose the government increases the size of a tax by 20 percent.The deadweight loss from that tax

Correct Answer
verified
B

Ronald Reagan believed that reducing income tax rates would

Correct Answer
verified

In the early 1980s,which of the following countries had a marginal tax rate of about 80 percent?

Correct Answer
verified

Which of the following events always would increase the size of the deadweight loss that arises from the tax on gasoline?

Correct Answer
verified

Which of the following statements is correct?

Correct Answer
verified

Assume that for good X the supply curve for a good is a typical,upward-sloping straight line,and the demand curve is a typical downward-sloping straight line.If the good is taxed,and the tax is tripled,the

Correct Answer
verified

Figure 8-22 -Refer to Figure 8-22.Suppose the government changed the per-unit tax on this good from $3.00 to $1.50.Compared to the original tax rate,this lower tax rate would

Correct Answer
verified
D

Figure 8-22 -Refer to Figure 8-22.Suppose the government initially imposes a $3 per-unit tax on this good.Now suppose the government is deciding whether to lower the tax to $1.50 or raise it to $4.50.Which of the following statements is not correct?

Correct Answer
verified

Suppose the federal government doubles the gasoline tax.The deadweight loss associated with the tax

Correct Answer
verified

Figure 8-24.The figure represents the relationship between the size of a tax and the tax revenue raised by that tax. -Refer to Figure 8-24.Tax revenue would

Correct Answer
verified

Figure 8-23.The figure represents the relationship between the size of a tax and the tax revenue raised by that tax. -Refer to Figure 8-23.The curve that is shown on the figure is called the

Correct Answer
verified

The Laffer curve illustrates that

Correct Answer
verified

Assume that for good X the supply curve for a good is a typical,upward-sloping straight line,and the demand curve is a typical downward-sloping straight line.If the good is taxed,and the tax is doubled,the

Correct Answer
verified

Correct Answer
verified

Suppose the tax on automobile tires is increased so that the tax goes from being a "medium" tax to being a "large" tax.As a result,it is likely that

Correct Answer
verified

Figure 8-21 -Refer to Figure 8-21.Suppose the market is represented by Demand 1 and Supply 1.At first the government places a $3 per-unit tax on this good.Then the government decides to raise the tax to $6 per unit.Compared to the original tax rate,the higher tax will

Correct Answer
verified

Exam 8: Application the Cost of Taxation: Deadweight Loss and Tax Revenue As Taxes Vary

Which of the following ideas is the most plausible?

Correct AnswerverifiedShow Answer

An increase in the size of a tax is most likely to increase tax revenue in a market with

Correct AnswerverifiedD

Figure 8-22 -Refer to Figure 8-22.Suppose the government initially imposes a $3 per-unit tax on this good.Now suppose the government is deciding whether to lower the tax to $1.50 or raise it to $4.50.Which of the following statements is not correct?

Correct AnswerverifiedShow Answer

If the tax on a good is increased from $1 per unit to $4 per unit,the deadweight loss from the tax increases by a factor of

Correct AnswerverifiedShow Answer

Suppose the government increases the size of a tax by 20 percent.The deadweight loss from that tax

Correct AnswerverifiedB

Ronald Reagan believed that reducing income tax rates would

Correct AnswerverifiedShow Answer

In the early 1980s,which of the following countries had a marginal tax rate of about 80 percent?

Correct AnswerverifiedShow Answer

Which of the following events always would increase the size of the deadweight loss that arises from the tax on gasoline?

Correct AnswerverifiedShow Answer

Which of the following statements is correct?

Correct AnswerverifiedShow Answer

Assume that for good X the supply curve for a good is a typical,upward-sloping straight line,and the demand curve is a typical downward-sloping straight line.If the good is taxed,and the tax is tripled,the

Correct AnswerverifiedShow Answer

Figure 8-22 -Refer to Figure 8-22.Suppose the government changed the per-unit tax on this good from $3.00 to $1.50.Compared to the original tax rate,this lower tax rate would

Correct AnswerverifiedD

Figure 8-22 -Refer to Figure 8-22.Suppose the government initially imposes a $3 per-unit tax on this good.Now suppose the government is deciding whether to lower the tax to $1.50 or raise it to $4.50.Which of the following statements is not correct?

Correct AnswerverifiedShow Answer

Suppose the federal government doubles the gasoline tax.The deadweight loss associated with the tax

Correct AnswerverifiedShow Answer

Figure 8-24.The figure represents the relationship between the size of a tax and the tax revenue raised by that tax. -Refer to Figure 8-24.Tax revenue would

Correct AnswerverifiedShow Answer

Figure 8-23.The figure represents the relationship between the size of a tax and the tax revenue raised by that tax. -Refer to Figure 8-23.The curve that is shown on the figure is called the

Correct AnswerverifiedShow Answer

The Laffer curve illustrates that

Correct AnswerverifiedShow Answer

Assume that for good X the supply curve for a good is a typical,upward-sloping straight line,and the demand curve is a typical downward-sloping straight line.If the good is taxed,and the tax is doubled,the

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Suppose the tax on automobile tires is increased so that the tax goes from being a "medium" tax to being a "large" tax.As a result,it is likely that

Correct AnswerverifiedShow Answer

Figure 8-21 -Refer to Figure 8-21.Suppose the market is represented by Demand 1 and Supply 1.At first the government places a $3 per-unit tax on this good.Then the government decides to raise the tax to $6 per unit.Compared to the original tax rate,the higher tax will

Correct AnswerverifiedShow Answer

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D

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B

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D

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